Dynamic Strategic Procurement from Capacitated Suppliers

Abstract

M any industries are characterized by large buyers and suppliers whose decisions are influenced by the strategic interactions among these parties. Here we present an economic model for a monopolistic buyer that needs to procure a critical item from two candidate suppliers competing to win the buyer's account. The buyer's objective is to design a procurement process that minimizes its total cost. We analyze this problem under one static and two dynamic procurement design choices and investigate the impact of these choices and capacities on supplier profits and buyer's procurement cost. All three processes are modeled as non-cooperative games and solved under suitable equilibrium concepts. We have found that when the buyer can choose purchase quantities independent of quoted prices, dynamic procurement can lower its cost by as much as 50% when compared to static procurement. However, when the buyer is constrained to set a precommitment quantity and award sales starting with the low priced supplier, the savings obtained from dynamic procurement diminish, but the buyer can still save as much as 12.5%.

Effect of logistics integration and demand and supply uncertainties on manufacturing performance: A mediating role of product characteristics

“…In terms of distribution, the researchers are capable of developing novel scheduling, modelling, forecasting and guiding the flow of institutional contacts with interested stakeholders both inside and outside the organization, as well as contract producers and distributors (Dasci & Guler, 2019). For example, because information supply and information demand transfers are addressed concurrently in the same operation, they are free to pursue their primary aims in a greater capacity to deliver knowledge.…”

The Behavioral Effects of Competition Intensity and Cost Structure on Competing Suppliers: An Experimental Study in the Context of the USA

“…In the supply chain literature, outsourcing through competition has been widely studied from the theoretical standpoint (Dasci & Guler, 2019;Heese et al, 2020;Li et al, 2020;Zhao et al, 2014). The literature shows the way a competition is set up greatly affects players' incentive to exert higher effort in their attempts to earn higher payoffs (Anderson & Freeborn, 2010;Benjaafar et al, 2007;Cachon & Zhang, 2007;Elahi, 2013).…”

Strategic Overbidding in Dynamic Auctions: Structural Estimation of Value of Synergy

“…Our study shows that, the presence of synergies can generate dynamics and rational overbidding in sequential auctions, and estimates the unobserved synergy effect via structural estimation. Dasci and Guler (2019) analyzed the procurement process from a monopolistic buyer who procures from two candidate suppliers. In their theoretical model, the buyer can lower their costs by at least 12.5% if a dynamic rather than a static procurement process is used.…”

“…Dasci and Guler (2019) analyzed the procurement process from a monopolistic buyer who procures from two candidate suppliers. In their theoretical model, the buyer can lower their costs by at least 12.5% if a dynamic rather than a static procurement process is used.…”